Study: Licensing inhibits interstate migration

RALEIGH — Occupational licensing rules may be keeping people from moving across state lines and toward job opportunities, a new study from the National Bureau of Economic Research suggests.

University of Minnesota professors Janna E. Johnson and Morris M. Kleiner published a study linking state-specific licensing to reduced migration rates of people with jobs requiring licensing.

The pair analyzed 22 licensed occupations and found the migration rate for individuals in those state-specific licensed jobs 36 percent lower than those in other occupations.

“We don’t know if this reduced migration is restricting licensed individuals’ ability to respond to unexpected events, such as job loss or an increase in demand for their occupation in another state,” Johnson explained. “This is a question for future research.”

The authors observed that occupational licensing has become one of the most significant forms of labor market regulation in the United States. About 25 percent of the workforce requires a license to work. In 1950, that figure was only 5 percent.

While a handful of states have reciprocity agreements for their licensing systems, most states still require people to take state exams, pay fees, or spend a certain number of hours in training.

Some of North Carolina’s licensing boards in North Carolina have reciprocity agreements, such as the State Board of Certified Public Accountant Examiners. But others, such as the Department of Public Instruction, don’t have full reciprocity with other states. A licensed teacher with decades of experience wouldn’t be allowed to teach in a North Carolina public school without first obtaining a new license.

“The prospect of fulfilling those requirements may be enough of a deterrent to out-of-state teachers considering relocating to North Carolina, particularly if they are entertaining offers from districts in multiple states,” Terry Stoops, vice president of research and director of education studies at the John Locke Foundation, explained in a report.

Rolling back requirements on occupational licensing may be beneficial, say Johnson and Kleiner, who suggest the move “has the potential to enhance labor market fluidity, increase the efficiency of the labor market, and raise the earnings of regulated workers.”

The modern upsurge in licensing rules may help to explain two social trends that have puzzled scholars: declining rates of interstate migration and labor market churn over the last three decades. Annual interstate migration fell from 3 to 1.5 percent between 1980 and 2010 and annual job-to-job flows fell from 16 to 11 percent over the same time period.

Johnson and Kleiner suggest that, according to their study, occupational restrictions can account for some of the decline in the propensity for people to move across state lines or leave their current jobs for new ones.

“In theory, reciprocity agreements should help reduce the cost of re-licensure for individuals in licensed occupations who move between states,” Johnson said. “Whether reciprocity agreements reduce re-licensure costs enough to influence licensed individuals’ ability to move across states in all affected occupations is a question left for future research.”